Question

Give an example of a consumption good and an example of an investment good. Explain why the two are different, as a macroeconomist would think of them differently. Also, explain why investment is important for the long term health of an economy.

Answer 1

Answer-

consumption goods- clothing, food etc

investment goods- machines, equipments etc

consumption goods are the final goods that are purchased for consumption and not to produce some other good, on the other hand investment goods are purchased to make consumption goods.

Investment is important for an economy because it keeps the money in the market and leads to new projects which lead to enployment. Investment creates huge return to investors which encourages others as well to invest which helps the economy to grow in the long run.